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If you're using land for taxable and non-taxable purposes at the same time, you need to make an adjustment. The amount the land is being used for taxable purposes is calculated as:

(Consideration for taxable supply / Total consideration for supply) x 100%

Consideration for taxable supply is the amount derived on disposal or if not disposed of its market value at the time of adjustment

Total consideration for supply is the consideration for taxable supply plus all rental income derived or treated as derived.

Learn more about GST rules on using land for both taxable and non-taxable purposes in the Tax Information Bulletin.

Tax Information Bulletin | Volume 23 No. 1 | February 2011

Lee's bungalow

Lee buys a bungalow for $230,000, with $30,000 GST claimed. She intends to do it up and sell it for a profit. When the renovation is completed, the market value of the property is up to $360,000, but the property market has taken a dive. Lee decides to rent out the residential property (non-taxable use for GST purposes) to a third party until the market improves and can be sold (taxable use) for a better price. From a GST perspective, the residential property is now used concurrently for the taxable sale and non-taxable residential rental purposes and an adjustment is required. The rental income is $26,000. At the end of the first adjustment period, the adjustment is:

  $360,000MV/$386,000 (MV + rental) x 100 = 93% so entitled to retain 93% or original input claimed

  GST initially claimed of $30,000 x 7% = $2,100

The $2,100 is an adjustment that must be paid back when the next return is filed.

Last updated: 28 Apr 2021
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